Chailease PBCom Finance Corporation

July 19, 1994 Chailease PBCom Finance Corporation 12 Flr., 6750 Ayala Avenue, Makati, Metro Manila Attention : Mr . Madison M . S . Liu Executive Vice-President S i r : This refers to your letter of June 30, 1994 requesting opinion on the following queries: 1. Is a financing company allowed to engage in foreign currency transactions in its financing activities (e.g. direct lending)? 2. If allowed, are there guidelines, rules and regulations covering the implementation of the ruling on said transaction? The term "Financing Companies" is defined under Republic Act No. 5980, otherwise known as the "Financing Act", as follows: "(a) "Financing Companies", hereinafter called companies, are corporations, or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commissioner and the Cooperatives Administration Office, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property." (Emphasis supplied) The term " credit " in the above definition is further defined in the said Act as follows: "(c) " Credit " shall mean any loan, mortgage, deed of trust advance, or discount; any conditional sales contract, any contract to sell, or sale or contract of sale of property or service, either for present or future delivery, under which, part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any option, demand, lien, pledge, or other claim against or for the delivery of, property or money, any purchase, or other acquisition of or any credit upon the security of, any obligation or claim arising out of the foregoing ; and any transaction or series of transactions having a similar purpose or effect." (Emphasis supplied) Since the "financing activities" under RA 5980 involve payment obligations , they are subject to R.A. No. 529, otherwise known as "AN ACT TO ASSURE UNIFORM VALUE OF PHILIPPINE COIN & CURRENCY", which requires that payment of debts/obligations shall be in the form of legal tender in the Philippines. Said Law provides: "SECTION 1. Every provision contained in, or made with respect to, any obligation which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null, and void and of no effect , and no such provision shall be contained in, or made with respect to, any obligation hereafter incurred. The above provision shall not apply to (a) transactions where the funds involved are the proceeds of loans or investments made directly or indirectly, through bonafide intermediaries or agents, by foreign government, their agencies and instrumentalities, and international financial and banking institutions so long as the funds are identifiable, as having emanated from the sources enumerated above; (b) transactions affecting high-priority economic projects for agricultural, industrial and power development as may determined by the National Economic Council which are financed by or through foreign funds; (c) forward exchange transactions entered into between banks and between banks and individuals or juridical persons; (d) import/export and other international banking, financial investment and industrial transactions. With the exception of the cases enumerated in items (a), (b), (c) and (d) in the foregoing provisions, in which cases the terms of the parties' agreement shall apply, every obligation heretofore or hereafter incurred, whether or not such provision as to payment is constrained therein or made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts ; Provided, That if the obligation was incurred prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine currency, it shall be discharged in Philippine currency measured at the prevailing rates of exchange at the time the obligation was incurred except in case of loan made in foreign currency stipulated to be payable in the same currency in which case the rate of exchange prevailing at the time of the stipulated date payable shall prevail. All coins and currency including Central Bank notes, heretofore and hereafter issued and declared by the Government of the Philippines shall be legal tender for all debts , public and private." (Emphasis supplied) Likewise, Republic Act No. 7653, otherwise known as "The New Central Bank Act, provides: SECTION 52. Legal Tender Power . All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender of the Philippines for all debts , both public and private: Provided, however That, unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or less." (Emphasis supplied) Therefore, your query is answered in the negative. Please be advised accordingly. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner